题目
specific responsibility for undertaking annual reviews of existing clients. The following situations have arisen in
connection with three client companies:
(a) Dedza was appointed auditor and tax advisor to Kora Co, a limited liability company, last year and has recently
issued an unmodified opinion on the financial statements for the year ended 30 June 2005. To your surprise,
the tax authority has just launched an investigation into the affairs of Kora on suspicion of underdeclaring income.
(7 marks)
Required:
Identify and comment on the ethical and other professional issues raised by each of these matters and state what
action, if any, Dedza should now take.
NOTE: The mark allocation is shown against each of the three situations.
第1题
(c) Describe the audit procedures you should perform. to determine the validity of the amortisation rate of five
years being applied to development costs in relation to Plummet. (5 marks)
第2题
A.It seems our records are always a ltte incomplete
B.It's a piece of cake
C.I'm stil working on ironing out a few problems
第3题
for undertaking annual reviews of existing clients and advising whether an engagement can be properly continued.
The following matters have arisen in connection with recent assignments:
(a) Leon Dormido is the senior in charge of the audit of the financial statements of Moreno, a limited liability
company, for the year ending 30 June 2005. Moreno’s Chief Executive Officer, James Bay, has just sent you an
e-mail to advise you that Leon has been short-listed for the position of Finance Director. You were not previously
aware that Leon had applied for the position. (5 marks)
Required:
Comment on the ethical and other professional issues raised by each of the above matters and their implications,
if any, for the continuation of each assignment.
NOTE: The mark allocation is shown against each of the three issues.
第4题
You are the audit senior, and this is your first year on this audit. In order to familiarise yourself with Sunflower, the audit manager has asked you to undertake some research in order to gain an understanding of Sunflower, so that you are able to assist in the planning process. He has then asked that you identify relevant audit risks from the notes below and also consider how the team should respond to these risks.
Sunflower has spent $1·6 million in refurbishing all of its supermarkets; as part of this refurbishment programme their central warehouse has been extended and a smaller warehouse, which was only occasionally used, has been disposed of at a profit. In order to finance this refurbishment, a sum of $1·5 million was borrowed from the bank. This is due to be repaid over five years.
The company will be performing a year-end inventory count at the central warehouse as well as at all 25 supermarkets on 31 December. Inventory is valued at selling price less an average profit margin as the finance director believes that this is a close approximation to cost.
Prior to 2012, each of the supermarkets maintained their own financial records and submitted returns monthly to head office. During 2012 all accounting records have been centralised within head office. Therefore at the beginning of the year, each supermarket’s opening balances were transferred into head office’s accounting records. The increased workload at head office has led to some changes in the finance department and in November 2012 the financial controller left. His replacement will start in late December.
Required:
(a) List FIVE sources of information that would be of use in gaining an understanding of Sunflower Stores Co, and for each source describe what you would expect to obtain. (5 marks)
(b) Using the information provided, describe FIVE audit risks and explain the auditor’s response to each risk in planning the audit of Sunflower Stores Co. (10 marks)
(c) The finance director of Sunflower Stores Co is considering establishing an internal audit department. Required: Describe the factors the finance director should consider before establishing an internal audit department. (5 marks)
第5题
Certified Accountants. You are currently reviewing the audit working papers for Pulp Co, a long standing audit client,
for the year ended 31 January 2008. The draft statement of financial position (balance sheet) of Pulp Co shows total
assets of $12 million (2007 – $11·5 million).The audit senior has made the following comment in a summary of
issues for your review:
‘Pulp Co’s statement of financial position (balance sheet) shows a receivable classified as a current asset with a value
of $25,000. The only audit evidence we have requested and obtained is a management representation stating the
following:
(1) that the amount is owed to Pulp Co from Jarvis Co,
(2) that Jarvis Co is controlled by Pulp Co’s chairman, Peter Sheffield, and
(3) that the balance is likely to be received six months after Pulp Co’s year end.
The receivable was also outstanding at the last year end when an identical management representation was provided,
and our working papers noted that because the balance was immaterial no further work was considered necessary.
No disclosure has been made in the financial statements regarding the balance. Jarvis Co is not audited by our firm
and we have verified that Pulp Co does not own any shares in Jarvis Co.’
Required:
(b) In relation to the receivable recognised on the statement of financial position (balance sheet) of Pulp Co as
at 31 January 2008:
(i) Comment on the matters you should consider. (5 marks)
第6题
(c) During the year Albreda paid $0·1 million (2004 – $0·3 million) in fines and penalties relating to breaches of
health and safety regulations. These amounts have not been separately disclosed but included in cost of sales.
(5 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Albreda Co for the year ended
30 September 2005.
NOTE: The mark allocation is shown against each of the three issues.
第7题
(c) In April 2006, Keffler was banned by the local government from emptying waste water into a river because the
water did not meet minimum standards of cleanliness. Keffler has made a provision of $0·9 million for the
technological upgrading of its water purifying process and included $45,000 for the penalties imposed in ‘other
provisions’. (5 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Keffler Co for the year ended
31 March 2006.
NOTE: The mark allocation is shown against each of the three issues.
第8题
(a) Define audit risk and the components of audit risk. (5 marks)
You are an audit supervisor of Amethyst & Co and are currently planning the audit of your client, Aquamarine Co (Aquamarine) which manufactures elevators. Its year end is 31 July 2016 and the forecast profit before tax is $15·2 million.
The company undertakes continuous production in its factory, therefore at the year end it is anticipated that work in progress will be approximately $950,000. In order to improve the manufacturing process, Aquamarine placed an order in April for $720,000 of new plant and machinery; one third of this order was received in May with the remainder expected to be delivered by the supplier in late July or early August.
At the beginning of the year, Aquamarine purchased a patent for $1·3 million which gives them the exclusive right to manufacture specialised elevator equipment for five years. In order to finance this purchase, Aquamarine borrowed $1·2 million from the bank which is repayable over five years.
In January 2016 Aquamarine outsourced its payroll processing to an external service organisation, Coral Payrolls Co (Coral). Coral handles all elements of the payroll cycle and sends monthly reports to Aquamarine detailing the payroll costs. Aquamarine ran its own payroll until 31 December 2015, at which point the records were transferred over to Coral.
The company has a policy of revaluing land and buildings and the finance director has announced that all land and buildings will be revalued at the year end. During a review of the management accounts for the month of May 2016, you have noticed that receivables have increased significantly on the previous year end and against May 2015.
The finance director has informed you that the company is planning to make approximately 65 employees redundant after the year end. No decision has been made as to when this will be announced, but it is likely to be prior to the year end.
Required:
(b) Describe SIX audit risks, and explain the auditor’s response to each risk, in planning the audit of Aquamarine Co. (12 marks)
(c) Explain the additional factors Amethyst & Co should consider during the audit in relation to Aquamarine Co’s use of the payroll service organisation. (3 marks)
第9题
(b) You are the audit manager of Petrie Co, a private company, that retails kitchen utensils. The draft financial
statements for the year ended 31 March 2007 show revenue $42·2 million (2006 – $41·8 million), profit before
taxation of $1·8 million (2006 – $2·2 million) and total assets of $30·7 million (2006 – $23·4 million).
You are currently reviewing two matters that have been left for your attention on Petrie’s audit working paper file
for the year ended 31 March 2007:
(i) Petrie’s management board decided to revalue properties for the year ended 31 March 2007 that had
previously all been measured at depreciated cost. At the balance sheet date three properties had been
revalued by a total of $1·7 million. Another nine properties have since been revalued by $5·4 million. The
remaining three properties are expected to be revalued later in 2007. (5 marks)
Required:
Identify and comment on the implications of these two matters for your auditor’s report on the financial
statements of Petrie Co for the year ended 31 March 2007.
NOTE: The mark allocation is shown against each of the matters above.
第10题
a national supermarket chain of 23 stores, five of which are in the capital city, Urvina. All the stores are managed in
the same way with purchases being made through Volcan’s central buying department and product pricing, marketing,
advertising and human resources policies being decided centrally. The draft financial statements for the year ended
31 March 2005 show revenue of $303 million (2004 – $282 million), profit before taxation of $9·5 million (2004
– $7·3 million) and total assets of $178 million (2004 – $173 million).
The following issues arising during the final audit have been noted on a schedule of points for your attention:
(a) On 1 May 2005, Volcan announced its intention to downsize one of the stores in Urvina from a supermarket to
a ‘City Metro’ in response to a significant decline in the demand for supermarket-style. shopping in the capital.
The store will be closed throughout June, re-opening on 1 July 2005. Goodwill of $5·5 million was recognised
three years ago when this store, together with two others, was bought from a national competitor. It is Volcan’s
policy to write off goodwill over five years. (7 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Volcan for the year ended
31 March 2005.
NOTE: The mark allocation is shown against each of the three issues.
第11题
(b) Seymour offers health-related information services through a wholly-owned subsidiary, Aragon Co. Goodwill of
$1·8 million recognised on the purchase of Aragon in October 2004 is not amortised but included at cost in the
consolidated balance sheet. At 30 September 2006 Seymour’s investment in Aragon is shown at cost,
$4·5 million, in its separate financial statements.
Aragon’s draft financial statements for the year ended 30 September 2006 show a loss before taxation of
$0·6 million (2005 – $0·5 million loss) and total assets of $4·9 million (2005 – $5·7 million). The notes to
Aragon’s financial statements disclose that they have been prepared on a going concern basis that assumes that
Seymour will continue to provide financial support. (7 marks)
Required:
For each of the above issues:
(i) comment on the matters that you should consider; and
(ii) state the audit evidence that you should expect to find,
in undertaking your review of the audit working papers and financial statements of Seymour Co for the year ended
30 September 2006.
NOTE: The mark allocation is shown against each of the three issues.
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